Disney's New 'Netflix Killer' Won't Turn A Profit For At Least Five Years

In a move that leverages its purchases of a suite of entertainment assets formerly owned by 21st Century Fox, as well as its purchase of the Star Wars franchise and other popular entertainment assets, Disney on Thursday unveiled its "Netflix killer" streaming service. And in keeping with the business model for Silicon Valley 'content' plays, Disney said that the service, which will be priced at just $7.99 a month, or an annual fee of $69.99, isn't expected to turn a profit for at least five years.

During what was described as an "Apple-style" product launch event, Disney introduced the new service Thursday on a sound stage used to make the original "Mary Poppins," delivering an Apple-style presentation of the online product, Bloomberg reports.

Despite the company's promise that the service could be a perpetual lossmaker, investors embraced the news, sending Disney shares nearly 4% higher in a powerful vote of confidence. This isn't so hard to fathom, given Disney's strong content offerings, ranging from the entire catalog of 'The Simpsons' (which it acquired in the Fox deal) as well as movies from Pixar studios, as well as its Marvel holdings. To try and entice customers, the service will be priced at roughly two-thirds the cost of Netflix's most popular plan.

"We are confident this is a product people are going to sign up in droves to have," CEO Bob Iger said during a Bloomberg Television interview with Emily Chang.

The service, called "Disney+" will launch in the US, western Europe, and Asia on Nov. 19, before arriving in Eastern Europe and Latin America a year later. 

Now that it has ended its licensing deals with Netflix and other rivals, Disney+ expects to dump $1 billion into streaming programming over the next year. It doesn't expect to make a profit until 2024. It expects roughly two-thirds of those sales to be overseas.

In keeping with the 'Apple' approach to the unveiling, Disney introduced the service with a humorous video where characters from "The Simpsons" saluted their new corporate overlords, as a signed picture of Rupert Murdoch, the media mogul who controls Fox Corp and News Corp., and who sold all the Fox studio assets to Disney as part of the deal, languished in the trash. A banner reading "Welcome Synergy", a reference to the Fox acquisition, hung overhead.

Disney provided a glimpse at the new platform's interface, which slightly resembled HBO's digital streaming platform.

 

Amid the excitement from the announcement, Disney CEO Bob Iger confirmed during an investor Q&A rumors that he would be stepping down in 2021 (but for real this time), when his contract expires.

Of course, this isn't Disney's first foray into the world of streaming. With its acquisition of the Fox assets, it gained a majority stake in Hulu TV, the popular online streaming service (Disney was one of the original backers of Hulu), and is now considering whether to expand it overseas. Disney revealed that a recent price cut to $6 a month brought in a surge of new customers. Disney expects Hulu ad revenue to double over the next few years.

 It acquired majority control of the Hulu TV service with the $71 billion Fox deal, and it’s now considering whether to expand that product overseas.

"Hulu is doing just great," said Kevin Mayer, chairman of Disney’s direct-to-consumer and international operations. "We are really pleased."

Disney also has the ESPN+ online sports service, which it's planning to expand to Latin America. That product could lose some $650 million over the next two years, the company said. At some point, ESPN+ and Disney+ might be bundled together.

Disney has at least one advantage over Netflix in that it has a diversified revenue stream and plenty of 'synergies' to feed the content beast. Still, all scale and no profits isn't a recipe for a sustainable business, and whether Disney manages to secure a foothold in the increasingly crowded streaming space, which has seen new offerings from Apple, DC Comics and others in recent months, remains to be seen.

In the meantime, here's a rundown of the content that Disney has confirmed will be included on the platform, courtesy of CNN.

Live Action Series:

* High School Musical: The Musical: The Series
* The Mandalorian
* Diary of a Female President
* The Falcon and the Winter Soldier
* Loki
* Untitled Cassian Andor Series
* WandaVision

Animated Series & Shorts:

* Forky Asks a Question
* SparkShorts
* Lamp Life
* Monsters at Work
* Star Wars: The Clone Wars
* Marvel's What If...?

Documentaries, Unscripted Series & Live Specials:

* Encore!
* Untitled Walt Disney Imagineering Documentary Series
* Marvel's Hero Project
* The World According to Jeff Goldblum
* Be Our Chef
* Cinema Relics: Iconic Art of the Movies
* Into the Unknown: Making Frozen 2
* Magic of Animal Kingdom
* Marvel's 616
* (Re)Connect
* Rogue Trip
* Shop Class
* Earthkeepers
* Ink & Paint

Original Films

* Lady & The Tramp
* Noelle
* The Phineas and Ferb Movie
* Stargirl